T.C. Memo. 2021-124

UNITED STATES TAX COURT

KARLA AMBURGEY AND MARY DUTEY-AMBURGEY a.k.a. MARY 

AMBURGEY, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 3339-20. Filed November 1, 2021.

C. Page Hamrick III, for petitioners.

Lisa P. Lafferty, for respondent.

MEMORANDUM OPINION

KERRIGAN, Judge: Respondent determined a deficiency of $15,348, an 

addition to tax pursuant to section 6651(a)(1) of $1,196, and an accuracy-related 

penalty pursuant to section 6662(a) of $3,070 for 2018. Unless otherwise 

indicated, all section references are to the Internal Revenue Code (Code) in effect 

Served 11/01/21
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[*2] at all relevant times, and all Rule references are to the Tax Court Rules of 

Practice and Procedure. We round all monetary amounts to the nearest dollar.

The issues for consideration are whether for 2018 petitioners are: 

(1) required to repay an advance premium tax credit (APTC); (2) liable for an 

addition to tax pursuant to section 6651(a)(1); and (3) liable for the accuracyrelated penalty pursuant to section 6662(a).

Background

The parties submitted this case fully stipulated, without trial, pursuant to 

Rule 122. The stipulation of facts and attached exhibits are incorporated herein by 

this reference. Petitioners resided in Florida when they timely filed their petition.

Petitioners, a married couple, reported an adjusted gross income of $181,183 

on their joint Federal tax return for 2018. Petitioners did not receive tax-exempt 

interest, nontaxable Social Security, or excluded foreign earned income during 

2018, and their modified adjusted gross income was $181,183.

Petitioners obtained health insurance for 2018 through the Health Insurance 

Marketplace. They were enrolled in Florida Blue HMO throughout 2018. 
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[*3] Petitioners’ health insurance premium was $1,772 per month ($21,269 for the 

year).

1

In 2018 petitioners received an APTC benefit of $1,279 per month, totaling 

$15,348 for the year. The APTC was paid directly to petitioners’ insurance 

company and applied to the cost of petitioners’ 2018 health insurance premiums.

On April 25, 2019, petitioners untimely filed their Form 1040, U.S. 

Individual Income Tax Return, for 2018. Petitioners’ 2018 income tax return was 

due April 15, 2019. Their return showed a tax liability of $12,821 for 2018. For 

2018 petitioners’ household consisted of two people. Their income tax return for 

2018 did not include Form 8962, Premium Tax Credit (PTC), used to reconcile the 

amount of APTC a taxpayer received with the amount he or she is entitled to 

receive.

On November 22, 2019, respondent issued to petitioners a notice of 

deficiency with respect to their Federal income tax for 2018. Respondent 

determined that petitioners were not entitled to any PTC and that they must repay 

the APTC paid on their behalf in 2018. Respondent also determined an addition to 

1

The total annual health insurance premium of $21,269 differs from the 

product of the monthly health insurance premium multiplied by 12 months--

$21,264--due to rounding.
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[*4] tax for failure to file timely pursuant to section 6651 and a substantial 

understatement of income tax penalty pursuant to section 6662(a) and (b)(2). The 

section 6662 penalty was automatically computed through electronic means.

Discussion

Generally, the Commissioner’s determinations in a notice of deficiency are 

presumed correct and the taxpayer bears the burden of proving that those 

determinations are erroneous. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 

115 (1933).

I. APTC

Petitioners do not dispute that an APTC was paid on their behalves. Rather, 

they dispute that they should have to repay it. The PTC offsets the cost of health 

insurance. A recipient of the PTC can choose to receive the payments in advance--

an APTC. These payments are paid directly to the insurer. See sec. 36B; McGuire 

v. Commissioner, 149 T.C. 254, 260 (2017).

At the end of the year a taxpayer who received an APTC is required to 

reconcile the amount of the PTC already received with the entitlement amount. 

See sec. 36B(f)(2). A taxpayer reconciles these amounts by completing Form 8962 

and filing it with his or her tax return. If the APTC is more than the entitlement 

amount, the taxpayer owes the Government the excess APTC, and it is reflected as 
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[*5] an increase in tax. See sec. 36B(f)(2)(A); Keel v. Commissioner, T.C. Memo. 

2018-5, at *6.

A taxpayer with income greater than 400% of the Federal poverty line (FPL) 

is not eligible for the PTC, meaning the full amount of the APTC received during 

the tax year must be included as a tax liability on the taxpayer’s tax return. Sec. 

36B(c)(1)(A), (f)(2)(B); see also sec. 1.36B-4(a)(4), Example (5), Income Tax 

Regs. Household income, as relevant to petitioners, is defined as modified 

adjusted gross income. See sec. 36B(d)(1) and (2)(A). Modified adjusted gross 

income means gross income adjusted by certain items, including Social Security 

benefits, not included in gross income. Sec. 36B(d)(2)(B)(iii).

For 2018 the FPL was $16,240 for a household of two in Florida, and 400% 

of the FPL was $64,960. See 82 Fed. Reg. 8832 (Jan. 31, 2017). Petitioners 

reported household income of $181,183 for 2018. Because petitioners were not 

entitled to the PTC in 2018, any APTC received is excess APTC and must be 

repaid to the Government. We hold that they are liable for the $15,348 deficiency.

Petitioners claim respondent cannot assess a deficiency based on excess 

APTC because the “tax is void and of no effect as in violation of the Constitution 

of the United States.” We disagree.
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[*6] In Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012), the Supreme 

Court held that the Affordable Care Act’s (ACA) penalty-backed individual shared 

responsibility payment is constitutional. Petitioners argue that a subsequent 

opinion, Texas v. United States, 945 F.3d 355 (5th Cir. 2019), rev’d and remanded 

sub nom. California v. Texas, 593 U.S. , 141 S. Ct. 2104 (2021), renders the 

individual shared responsibility payment and associated penalty invalid. We are 

not persuaded.

In Texas the U.S. Court of Appeals for the Fifth Circuit dealt with 2017 

amendments to the ACA that reduced the individual shared responsibility payment 

under section 5000A(c) to zero. These 2017 amendments were not effective until 

after December 31, 2018. Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, sec. 

11081, 131 Stat. at 2092. The deficiency at issue here stems from an increase in 

tax due to excess APTC paid on petitioners’ behalves throughout 2018 before the 

ACA amendments discussed in Texas took effect. Therefore, the reasoning of the 

U.S. Court of Appeals for the Fifth Circuit in Texas does not apply.

On June 17, 2021, the Supreme Court vacated the judgment of the Court of 

Appeals in Texas and remanded the case with instructions to dismiss. See

California v. Texas, 539 U.S. at , 141 S. Ct. at 2120. Petitioners have failed to 

meet their burden of showing that the provisions of section 36B violate the 
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[*7] Constitution. See Conard v. Commissioner, 154 T.C. 96, 103 (2020) 

(rejecting taxpayer’s constitutional challenge of a Code provision because taxpayer 

failed to negate “every conceivable basis which might support” the legislation

(quoting Estate of Kunze v. Commissioner, 233 F.3d 948, 954 (7th Cir. 2000), 

aff’g T.C. Memo. 1999-344)).

II. Addition to Tax

Section 6651(a)(1) imposes an addition to tax if the taxpayer fails to file an

income tax return by the required due date, including any extension of time for 

filing. Under section 7491(c) the Commissioner bears the burden of production 

with respect to the liability of the taxpayer for additions to tax. See Higbee v. 

Commissioner, 116 T.C. 438, 446-447 (2001). If the Commissioner meets the 

burden, the taxpayer has the burden of proving that failure to timely file was due to 

reasonable cause and not willful neglect. See sec. 6651(a)(1); Higbee v. 

Commissioner, 116 T.C. at 447.

Petitioners stipulated that they untimely filed their 2018 Federal tax return 

and have not contended that they had reasonable cause. The Commissioner has 

met the burden of production. Petitioners are liable for the addition to tax pursuant 

to section 6651(a)(1).
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[*8] III. Section 6662(a) Penalty

The Commissioner bears the burden of production with respect to the 

penalty imposed by section 6662(a). See sec. 7491(c). This burden of production 

includes producing evidence that respondent complied with the procedural 

requirements of section 6751(b). Respondent’s automated underreporter program 

detected the deficiency, and section 6751(b) does not apply to automated penalties. 

See Walquist v. Commissioner, 152 T.C. 61 (2019).

Section 6662(a) and (b)(2) imposes a 20% penalty on any portion of an 

underpayment attributable to a substantial understatement of income tax. An 

understatement of tax is equal to the amount of tax required to be shown on the 

return, less the amount shown. Sec. 6662(d)(2)(A). With respect to individual 

taxpayers, an understatement of tax is substantial if it exceeds the greater of 10% 

of the tax required to be shown in the return or $5,000. Sec. 6662(d)(1)(A). The 

deficiency meets these threshold requirements.

The penalty for an underpayment attributable to a substantial understatement 

of income tax under section 6662(b)(2) will not apply to the extent that a taxpayer 

shows he or she exercised both reasonable care and good faith with respect to that

portion of the underpayment. Sec. 6664(c). Petitioners have not argued or 
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[*9] presented any evidence that their underpayment of tax was due to reasonable 

cause. Therefore, petitioners are liable for the section 6662(a) penalty.

Decision will be entered for 

respondent.